Jim Cramer questioned the reaction to Rubrik, Inc.’s (NYSE:RBRK) latest earnings report during the September 2 episode of Mad Money, as he said:
What just happened to the stock of Rubrik? That’s the data security company, reported a seemingly very strong quarter last week… The stock dropped 13% the next day. Darn thing’s been drifting lower ever since. Now, this is kind of crazy, people. Rubrik posted a big revenue beat. Earned 20 cents per share when the analysts were looking for 4 cents. They raised their full-year forecast for revenue. Annual recurring revenue was sensational. Margins, free cash flow good too. Stock got hurt. Now some of that’s because Rubrik’s billings, some people say, came in a little light. I think it’s supposedly because the stock had run up like crazy in the month before the quarter. It just came in maybe too hot. The stock’s up 14% for the year.
Rubrik Earnings Beat Estimates and Raise Full-Year Guidance
Rubrik, Inc. reported revenue of $427.3 million for the second quarter fiscal year 2027, up 38% year over year and above Wall Street’s roughly $396 million estimate. Non-GAAP diluted earnings were $0.20 per share, compared with a non-GAAP loss of $(0.03) per share a year earlier and a $0.04 consensus estimate. Subscription ARR increased 33% to $1.66 billion, while net new subscription ARR rose 35% to approximately $96 million.
Management raised its fiscal 2027 outlook. Revenue is now expected at $1.685 billion to $1.693 billion, subscription ARR at $1.880 billion to $1.885 billion and free cash flow at $323 million to $333 million. Third-quarter revenue guidance of $429 million to $431 million also implies continued strong growth.
Moreover, management said demand is being driven by cyber resilience, platform consolidation and expansion into identity resilience. Customers with at least $100,000 of subscription ARR increased 23% to 3,084, while customers generating more than $1 million grew by more than 57%. Rubrik’s newer Agent Cloud product remains early, with more than 15 paying customers and only a minimal ARR contribution included in the fiscal-year outlook.
Bear Case is About the Price of Growth
Rubrik, Inc.’s biggest risk is that expectations have moved faster than the financial results. Shares rose about 48% in August before earnings, which leaves little room for disappointment. It generated $65.7 million of free cash flow in the quarter, up 14% year over year, compared with 38% revenue growth. Free-cash-flow margin declined to about 15% from 19% a year earlier. It remained GAAP-unprofitable, reporting a $61.8 million net loss, or $0.30 per diluted share.
The contrast is important because Rubrik’s valuation depends on investors believing that rapid growth will eventually produce much greater profitability. If ARR growth moderates before operating leverage accelerates, the stock could remain vulnerable even if the company continues to beat revenue estimates. The newer AI-security opportunity adds potential upside but should not yet be treated as a material earnings driver. Agent Cloud has more than 15 paying customers, although management said the product is still in the early stages of commercialization and is expected to make only a minimal contribution to fiscal 2027 ARR.
Hedge Funds Positioning and Short Interest
As per Insider Monkey’s tracking of more than 1,000 hedge funds, 44 hedge funds held RBRK at the end of the second quarter, down from 46 in the prior quarter. Additionally, short interest stood at roughly 9% of the float.
Rubrik, Inc.’s results were strong enough to support the business case, but not enough to overcome the expectations built into the stock after its August rally. The pullback puts greater emphasis on valuation, cash-flow conversion and the pace at which the company can turn its growing customer base into durable profits. For now, the earnings report supports Cramer’s view that the sell-off was driven more by expectations than by a deterioration in the business.
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